March 31, 2009

1. Diagnostics PolicyIssues UpdateKhatereh CallejaAssociate Vice PresidentTechnology and Regulatory Affairs March 31, 2009

2. Presentation Outline • Current Environment/Role for Diagnostics • General Legislative Landscape • Key Regulatory Issues • Other Policy Issues (Personalized Medicine, Companion Diagnostics)

3. Diagnostics Are Well-Positioned in the Current Environment • Innovation - Diagnostics are evolving to enable more sensitive and specific detection of disease at earlier stages than ever before • Low Cost – Diagnostics account for less than 2% of all Medicare spending, but influence up to 70% of all health care decisions • Underutilized - Standard of care diagnostics are underused 51% of the time, according to the Rand Corp.

4. Legislative Landscape: 111th Congress Early Priorities • Jobs and Economic Recovery (Stimulus) • Aid to States, Comparative Effectiveness Research, Health IT • Stimulus package is now law but more is expected • Other Key issues for this year • Energy/Global Warming, Health Reform, Financial services/financial market reform/housing • Tasks Related to a New Administration • Approve Cabinet nominations and other key personnel • President’s budget outline released—awaiting more detailed info

5. Diagnostics Legislation—A Look Back • Longstanding effort to reform payment system for diagnostics • Advanced Laboratory Diagnostics Act (ALDA) • Introduced in 109th and 110th Congresses • Demo to evaluate a new Medicare payment system for molecular diagnostics • Repeal of Lab Competitive Bidding Demo—in July 2008 Medicare bill • Genomics and Personalized Medicine Act • Obama/Burr-Cosponsors in Senate • Laboratory Test Improvement Act

6. Health Reform and Potential Role for Diagnostics • Senate is leading the way • June mark-up likely—floor action anticipated before August recess • White House is increasingly focused on health care reform • Key goals in Health Reform • Improve quality and efficiency; reduce cost (waste) • Diagnostics can play a key role—potential opportunity • Unlock the potential of personalized medicine

7. Health Reform—Potential Concepts for Diagnostic Payment Reform • Improve existing processes for establishing payment rates for new tests (gap-fill, crosswalk) • Pursue improved, new pathway for establishing payment • Current discussions taking place with stakeholders • Administrative (non-legislative) reform also being sought

8. Health Reform—Other Issues to Watch • Comparative effectiveness research • Diagnostics within the scope: concerns about evidence expectations • Potential use of diagnostics in research about other products • Diagnostics as a “pay-for”? • Achieving universal coverage will be expensive • Defense: possible cuts to Medicare’s clinical lab fee schedule?

9. Diagnostic Regulatory Prioritiesat a Glance

10. AdvaMed’s Risk-Based Approach for Regulation of All Diagnostics • Modernized approach to diagnostics regulation • Supports timely patient access to all safe and effective diagnostics • Based in FDA triage decision model and 1997 FDA Modernization Act requirement for “least burdensome” • Includes consideration of class I/II IVDs for exemption (MDUFMA qualitatative goal)

11. AdvaMed’s Risk-Based Approach for Regulation of All Diagnostics • Re-align intensity of regulatory oversight commensurate with patient risk • Focus FDA resources on high risk products • Exempt low risk diagnostic tests from premarket submission—Class I/IIIVD Candidates for potential exemption to be submitted to FDA this year • Apply risk-based approach to all diagnostic tests, regardless of where they are produced

12. AdvaMed’s Risk-Based Approach for Regulation of All Diagnostics • Adds objective, transparent, and standardized criteria/process(es) for stratifying pre-market regulatory data requirements • Considers clinical risk and availability of mitigations

13. Balancing Act—Potential Considerations Reduction/Mitigation associated w. -Scientific evidence -General and special controls -Laboratory process controls -User experience Risk associated w. -Clinical use of test -Novelty of analyte -Novelty of technology -Training of operator

14. Applying the Risk-Based Approach • Use tier triage decision model • Consider novelty of analyte, novelty of technology, clinical use of test, and training/ experience of operator • Consider risk mitigation factors • Assignment of a tier

15. Other Key MDUFMA-RelatedActivities • Pre-IDE Process ImprovementDevelopment of Industry Best Practices proposal for incorporation into guidance: • Meeting documentation/record • Time frame for action • Consistency in use of guidance documents • Information/context necessary for specific questions • Communication of rationale for change • Process for resolving comments/disagreements

16. Other Key MDUFMA-RelatedActivities • CLIA Waiver Process Improvement for POC Tests • Clarification via guidance on various issues • mimic intended use population, waiver operators/not trained tech, recommend to run 510(k) and CLIA studies separately, etc. • Ongoing discussion re. qualitative cut off studies and other areas in CLIA waiver guidance • Differences in regulatory authority/interpretation of CLIA regulations

17. Molecular Diagnostics and Companion Drug-Diagnostics • FDA working to publish revised drug-diagnostic co-development guidance—to clarify regulatory requirement • FDA focus on key role of companion diagnostic development (rather than codevelopment) • Recognition that one size of evidence will not fit all

18. Personalized Medicine Clearly A Priority • CDRH Matrix-Diagnostics and Personalized Medicine Network • FDA OIVD—Expanding Staff to support Personalized Medicine • New Senior Genomics Advisor in Office of Chief Scientist

19. Challenges, but Many Opportunities • Regulatory and reimbursement should encourage innovation • Current environment--Overall focus on promotion of personalized medicine and health care reform • Clear opportunities for diagnostics